OCBC

OCBC’ management painted a sanguine prospect on the acquisition of Wing Hang (WHB) in yesterday’s analysts’ briefing, where the group highlights that there are revenue synergies to be reaped by leveraging on WHB’s presence in the Pearl River Delta region and cross-selling of products by harnessing on each other’s product specialisations and strengths. A larger platform in Greater China should help capture the trade and investment flows in the region, capitalise on rising affluence in Greater China and build a stronger deposit base in USD and Rmb. Maybank-KE however opines that similar to other M&As, execution could prove harder than initially expected, and any concrete results would likely emerge only in 2H15E, at the earliest. Based on management’s guidance, OCBC expects the acquisition to turn accretive three years from now. The house expects OCBC’s recently announced rights issue to restore its transitional common equity Tier 1 (CET1) to 13.2% vs DBS’s 13.5% and UOB’s 13.9%, while the scrip dividend Scheme will remain a key feature going forward to raise its CET1 higher. Maybank-KE maintains its Hold rating on OCBC with an unchanged TP of $10.10.